Mega-regional negotiations will underwrite global governance on 21st-century trade issues and facilitate the proliferation of global and regional value chains. This column writes that Latin American countries would gain from a strengthened and effective WTO to help mitigate the friction and fragmentation that may result from the mega-regionals.

A lot is happening in trade negotiations in almost every corner of the world. Countries have been quite active at the bilateral and regional levels for some time – the WTO has been notified of 432 regional trade agreements.

In the past few years, however, ongoing negotiations have achieved a different dimension. Regional trade deals involve more partners, from different levels of development and different regions, cover larger volumes of trade, and aim at reaching agreements of a deeper nature on a wider range of issues. These mega-regional negotiations are in a category of their own, especially the Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership (TPP), the EU-Japan Free Trade Agreement and the Regional Comprehensive Economic Partnership (RCEP).

If current talks are successful, new rules will shape trade and investment flows, will underwrite global governance on 21st-century trade issues and facilitate the proliferation of global and regional value chains.

This may be a positive development in reinvigorating the WTO as a negotiating forum as some topics covered in these initiatives may find their way into the multilateral trading system, spearheading a virtuous circle of enhanced rulemaking and trade liberalisation not only at the regional level, but also in the multilateral setting.

A re-energised WTO could serve all countries well.

Or it may not be a constructive force.

The impact of mega-regional trade agreements on the multilateral trading system may depend on the specifics of the agreements that are finally concluded, and in particular on whether they are crafted with an inclusive perspective and are open to new members.

The impact on non-member countries may be significant, though it will vary in accordance with individual trade and investment patterns, as well as with the way in which each country chooses to relate to these new developments. If these negotiations do not come to conclusion as planned, it will be a different ball game altogether, from which no country would seem to gain.

Things have also been moving at the multilateral level, albeit at a different pace. Countries recently agreed in Bali to the Trade Facilitation Agreement, the first multilateral pact since the establishment of the WTO 20 years ago, raising hopes that more can be done in this forum. Plurilateral negotiations, related to the WTO in one way or another, are taking place among interested members in the areas of trade in services (the Trade in Services Agreement) and information technology (the expansion of the Information Technology Agreement) and will soon begin with the aim of liberalising trade in environmental goods.

Latin America’s position

Most Latin American countries are supportive of negotiations at the multilateral level –though a few were among the last to agree to the Trade Facilitation Agreement. The situation is more nuanced as regards plurilaterals, mega-regional and regional negotiations.

Brazil and Argentina do not participate in either plurilateral or mega-regional negotiations. Since establishing Mercosur in 1991, they have not concluded any other regional agreement, though the recent interest in reviving long-standing negotiations with the EU, if successful, would represent a turning point. Paraguay and Uruguay, by virtue of their membership in Mercosur, have held similar views, except in the case of the Trade in Services Agreement negotiations, where Paraguay has joined and Uruguay is seeking to participate. The two of them have also become observers of the Pacific Alliance.

Chile, Mexico and Peru are part of TPP – facilitated by their membership in the Asia Pacific Economic Cooperation forum- and have an extensive network of trade agreements with countries in the Americas, Europe and Asia. Mexico, in particular, is keen to join TTIP. Colombia, Costa Rica and Panama have expressed interest in TPP and have also negotiated a large number of trade agreements, including with both the EU and the US. As to the plurilaterals, they are all part of the Trade in Services Agreement, whereas Colombia and Costa Rica are participating in the Information Technology Agreement negotiations. Costa Rica has also joined the launch of the trade in environmental goods negotiation.

One very important development in Latin America is the Pacific Alliance, an ambitious and forward-looking integration scheme among Colombia, Chile, Mexico and Peru, to which Costa Rica and Panama are expected to join soon. This agreement aims at liberalising the movement of goods, services, people and capital among participating countries as well as to serve as a platform to further strengthen trade relations with Asia Pacific countries. Its vision and boldness has attracted the attention of nations worldwide, including Spain, Portugal, Germany, France, the US and other nations, who enjoy observer status in the initiative.

The Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua are part of trade agreements with the EU, the US and other countries, but have a more reserved position towards plurilaterals. They have specifically opposed TPP because of its potential detrimental impact on their textile and apparel trade with the US.

Though Latin American countries may benefit from the additional growth that the mega-regional negotiations – if successfully concluded – may bring to the global economy, the impact on each country will be as varied as its position towards them. The more or less a country is connected to global value chains or the more or less reliant it is on exports of natural resources or on its own domestic market, may determine the direction and magnitude of the impact. Whether each country opts to resist or embrace these changes will also define its future standing in global trade.

In thinking about a post-TTIP world, it is essential that TTIP be crafted as an inclusive agreement, where other nations may be invited to become members. If this were to be the case, several Latin American countries would be good candidates. Mexico would seem a natural given its strong integration with the US and the fact that it already has an agreement with the EU – which it aims to update. Other countries in the region, who already have trade agreements with both the EU and the US – central American countries, Chile, Colombia, and Peru – could also be well positioned to join.

Concluding remarks

In any case, all countries in Latin America would gain from a strengthened and effective WTO, among others to help mitigate the friction and fragmentation that may result from the mega-regionals. Prompt and full implementation of the items agreed in Bali, a renewed work program that would include both Doha Round issues and new topics relevant to the global economy, and an enhanced monitoring and surveillance role for the WTO are key to solidify the WTO’s centrality in the future.

For this agenda to come to fruition the continued engagement on the part of all members, including those negotiating other complex and time and capital consuming processes – such as TTIP – is essential.